Shipping of Goods
Shipping of goods refers to a process of transporting goods to other countries through different modes, such as sea and air. An exporter can ship goods with the help of the shipping infrastructure of the country. Most exportable goods can be exported without obtaining a license. However, items listed in Schedule 2 of the ITC (HS) Classifications of Export and Import items cannot be exported without obtaining a license.
In such cases, the exporter needs to submit an application for the grant of Export License to the Director General of Foreign Trade (DGFT). Such applications are considered by the Export Licensing Committee under the Chairmanship of Export Commissioner.
Table of Content
After obtaining the required export permits, an exporter needs to:
- Acquire a PAN-based Business Identification Number (BIN) from DGFT before filing of the shipping bill for export clearance.
- Register an authorised foreign exchange dealer code (by which export earnings will be received) and open a current account in the designated bank.
- Register a new airline, shipping line, steamer agent, port, or airport that will be used for shipping goods in customs systems.
- Register licenses in case the exporter wants to export under the export promotion scheme of the government.
Now, let us discuss the documents required and the duties to be paid for shipping goods.
Documents in Shipping
An exporter needs to produce certain documents to customs authorities to obtain a permission to export goods. Following are the major documents required for the customs clearance of export goods:
Commercial Invoice
It is a bill of goods sold to the buyer. Commercial invoices are used by customs authorities in determining the true value of the goods and customs duties. The format and information to be provided in a commercial invoice are specified by the government.
Figure shows a sample commercial invoice:
Bill of Lading
It is a contract document between an exporter and the carrier of goods. For example, if goods are exported by vessels, the bill of lading is signed between vessel authorities and the exporter. In simple words, a bill of lading is a commercial document issued by the carrier as an acknowledgement that the goods mentioned therein have been duly received, are on board, and will be delivered to the consignee. Therefore, the bill of lading ensures that goods are received by the original customer.
Figure shows a sample bill of lading:
Consular Invoice
It provides information on the shipment of goods, the consignor, the consignee, and the total value of the shipment.
Certificate of Origin
It shows the actual country of origin of goods that are being exported. The certificate of origin is signed in the exporting country by the consul of the importing country. Figure shows a certificate of origin:
Inspection Certificate
It gives specific information about the product, such as weight, ingredients, and product quality. According to Export Act 1963, the exporter needs to submit an application in the prescribed form to the Export Inspection Agency and the Export Inspection Council and obtain the inspection certificate.
Shipping Bill
It is a stamped bill issued to the exporter by customs authorities, implying that the cargo is allowed to be carted to docks.
Packing List
It provides details on the contents in containers to be shipped along with product descriptions such as weight and ingredients. This list assists in the physical examination of goods at the port by port authorities or by customers on the receipt of goods. It should be noted that the packing list is prepared in accordance with the instructions of customers.
Figure shows a sample packing list:
Bill of Exchange
The Export Act defines the Bill of Exchange as “an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to which it is addressed to pay on demand or at a fixed or determinable future time a sum of money, to or to the order of a specified person, or to bearer.
” In simple words, the bill of exchange is a commercial instrument through which an exporter asks the importer to pay for the goods to the importer’s bank. The importer receives funds from the bank. Therefore, as you can see, the bill of exchange is an important document that facilitates in payments in international trade.
Figure shows a sample bill of exchange:
Letter of Credit
It is a commercial letter issued by a bank at the request of the buyer of goods whereby the bank has taken the guarantee that the seller of the merchandise will receive the payment.
Inspection Certificate
It assures the consignee that any loss or damage to products in the transit would be compensated by the insurer. An exporter can obtain the insurance certificate from the freight forwarder.
Custom Duties in Shipping
As you have studied in the previous chapter, a custom duty is an indirect tax levied on goods imported into India as well as goods exported from India. In this chapter, we will study only about custom dutieslevied on export goods. In India, Customs Act, 1962 specifies customs duties to be levied on export goods. In addition, the Central Board of Excise & Customs (CBEC) is the apex authority in customs related matters in India. It should be noted that the goods to be exported are first classified into groups and sub-groups for levying customs duty.
The classification of different goods and the rates of duty are mentioned in Schedule 2 of the Customs Tariff Act 1975, which is shown as follows:
| SI. No | Chapter/Heading/Sub-heading Tariff Item | Description of article | Rate of duty |
|---|---|---|---|
| (1) | (2) | (3) | (4) |
| 1. | 0901 | Coffee | ₹2,200 per quintal |
| 2. | 0902 | Tea | ₹5 per kilogram |
| 3. | 0904 11 | Black pepper | ₹5 per kilogram |
| 4. | 0908 30 | Cardamom | ₹50 per kilogram |
| 5. | 0910 30 | Turmeric. in powder fonn | ₹1,500 per tonne |
| 6. | 0910 30 | Turmeric. in other thin powder form | ₹2,000 per tonne |
| 7. | 1006 30 20 | Basmati rice | ₹12,000 per tonne |
| 8. | 1202 10 | Groundnut in shell | ₹1,125 per tonne |
| 9. | 1202 20 | Groundnut kernel | ₹1,500 par tonne |
| 10. | 2305 | De-oiled mound nut oil cakes | ₹125 per tonne |
| 11. | 2305 | De-oiled ground nut meal (solvent extracted variety) | ₹125 per tonne |
| 12. | 2306 | De-oiled rice bran oil cake | ₹15% |
| 13. | 2309 | Anima/ feed | ₹125 per tonne |
| 14. | 2401 | Tobacco minima muted | ₹75 paise per kilogram or 20% Mintiest, is lower |
| 15. | 2508 50 | Sillimanite | ₹20% |
| 16. | 2508 50 | Kyamte | ₹40 per tonne |
| 17. | 2511 10 | Barytes | ₹50 per tonne |
| 18. | 2516 | Granite (including black granite) porphyry and basalt. all sorts | 15% |
| 19. | 2525.6814 | Mica including fabricated mica | 40% |
| 20. | 2526 20 00 | Steatite (Tate) | 20% |
| 21. | 2601 11 | Iron are and concentrates. Non-agglomerated | 30% |
| 22. | 2601 12 | Iron ore and concentrates. Agglomerated | 30% |
| 23. | 2602 | NIanganeseore | ₹20 per tonne |
| 24. | 2610 | Chromium ores and concentrates. all sons | 30% |
| 25. | 2820 10 00 | Manganese dioxide | 20% |
| 26. | 41, 43 | Hides, skins and leathers, tanned and untanned, all sorts but not including manufactures of leather | 60% |
| 27. | 5101 | Raw wool | 25% |
| 28. | 5201 | Raw cotton | ₹10,000 per tonne |
| 29. | 5202 | Cotton waste. all sons | 40% |
| 30. | 5308 | Cote yam | 15% |
| 31. | Any Chapter | Jute manufactures (including manufactures of Bimplipatarn jute or of meta fibre) when not in actual use as covering. receptacles or binding for other goods not elsewhere specified | ₹150 per tonne |
| 32. | 5310.6305 | Hessian cloth and bags | |
| 2508 50 | (i) Carpet backing | ₹700 per tonne | |
| (ii) Otherhessian cloth (including narrow backing cloth) and bags. when not in actual use as covering. receptacles or binding for other goods | ₹1.000 per tome | ||
| 33. | 5310 | Jute canvas, jute webbing, jute tarpeulin cloth and manufactures thereof when not in actual use as covering, receptcles or binding for other googs | Rs. 200 per tonnes |
| 34. | 5310 | Sacking (cloth, bags, twist, yarn, and twine) when not in actual use as covering, recrpeacles or bindings for other goods | 20% |
| 35. | 7201 | Pig iron and spiegeleisen in pigs, blocks or other premary forms | 20% |
| 36. | 7203 | Ferrous products obtained by direct reduction of iron one and other spongy ferrous groducts, in lumps, pellets or similar forms; iron having minmum purity by weight of 99.94% in lumps. Pellets or similar form. | 20% |
| 37. | 7204 | Ferrous waste and scrap, remelting scrap ingoes of iron or steel | 20% |
| 38. | 7205 | Granules and powers, of pig iron, spiegeleisen, iron or steel | 20% |
| 39. | 7206 | Iron and non-alloy steel in ingots or other primary forms | 20% |
| 40. | 7207 | Semi-finished products of iron or non-alloy steel | 20% |
| 41. | 7208 | Flat rolled products of iron or non-alloy stee, hot rolled, not clad, plated or coated | 20% |
| 42. | 7209 | Flat rolled products of iron or non-alloy steel, cold rolled (cold-reduced), not cald, plated or coated | 20% |
| 43. | 7210 | Flat rolled products of iron or non-alloy steel, plated or coated with zine | 20% |
| 44. | 7213 | Bars and rods, hot-rolled, in irregularly wound coils, of iron or non-alloy steel | 20% |
| 45. | 7214 | Other bars and rods or iron or non-alloy steel, not further worked than gorged, hot-rolled, hotdrawn or hot-extrude, but including those twisted after rolling | 20% |
| 46. | 7215 | Other bars and rods or iron or non-alloy steel | 20% |
| 47. | 7216 | Angles, shapes and sections of iron or non-alloy steel | 20%₹ |
| 48. | 7217 | Wire of iron or non-alloy steel | 20% |
| 49. | 7303, 7304 | Tubes and pipes, of iron or steel | 20% |
The following are the exemptions as mentioned in the Act:
- Goods imported but not allowed clearance on the ground of non-fulfilment of the requirements of Import Trade Control Regulations, confiscated by an order under section 182 of the Sea Customs Act, 1878 and allowed to be exported in lieu of confiscation, on payment of fine or otherwise.
- Goods produced or manufactured in India when exported for display in the showrooms of the Government of India in foreign countries or in the exhibitions or fairs held in foreign countries are exempt from the whole of the duty of customs leviable thereon:
- Provided that such goods are not sold or otherwise disposed of abroad:
- Provided further that, in the case of goods exported for display in the exhibitions or fairs held in foreign countries, it is certified by a duly authorised officer of the Ministry of Commerce that the Government of India have agreed to participate in such exhibitions or fairs.
- Provided that such goods are not sold or otherwise disposed of abroad:
Types of Shipping Bills
In case of export by sea or air, a shipping bill must be submitted to customs authorities in a prescribed format mentioning the name of the exporter, consignee, invoice number, details of packing, description of goods, quantity, and Freight on Board (FOB) value. In case of export by road, a bill of export needs to be submitted.
There are four different types of shipping bills depending on the type of the good. this is discontinued. The main difference among these bills is the colour of the form. Customs authorities can identify the type of the good by merely looking at the colour of the bill.
Following are the four types of shipping bills:
- Shipping bill for export of duty free goods: It is white in colour.
- Shipping bill for export of goods under claim for duty drawback: It is green in colour.
- Shipping bill for export of duty free goods ex-bond i.e. from bonded warehouse: This is pink in colour.
- Shipping bill for export of dutiable goods: This is yellow in colour.
